In the days before China’s May Day holiday in 2004, Beijing began a credit crunch that shook markets around the world on worries of an abrupt halt to the country’s economic boom.

The stern tone was set by the central government, which promised to choke investment in “overheated” sectors such as property and ordered the arrest of officials for building an unauthorised steel mill near Shanghai.

But instead of the hard landing predicted by many economists and feared by investors, Chinese growth eased only mildly before taking off again in mid-2005 and accelerating further in the first quarter of this year.

Update (4/28/06): Also see “China Raises Rates to Slow Its Economy” from the New York Times (link):

China’s central bank raised lending rates on Thursday for the first time in a year and a half, in a move by Chinese leaders to rein in the world’s fastest-growing economy.

The action aims to slow a spectacular surge in investment and it may potentially brake China’s voracious appetite on world markets for oil and other commodities.

With interest rates already climbing in the United States and the European Union, and with monetary officials starting to tighten policy in Japan, China seems to be joining the world’s central bankers in trying to gain control of speculation that has driven up prices of assets like gold and real estate.